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As someone who is deeply pro-American, I write this with genuine regret. Still, the fact is that China’s was the only one of
the world’s largest economies that did not contract last year. The contrast between their effectiveness (and concomitant brutality) in implementing their policies and the performance of most Western countries is glaring. Such rigor, combined with the notion that there are some 1.4 billion of these hard-working people, should
be considered strongly. Of course, many would point out that the travails of the pandemic can be traced to Chinese wet markets. This might well be accurate. But it is also irrelevant when it comes to this discussion.
The Great Depression that began in 1929 was triggered by
a stock market crash that originated in the United States. That
fact was fully forgotten in the ensuing socio-economic and geo-political disasters that followed. What remains is the ironic result that a singular crisis catalyzed by American excess resulted, within less than a generation, in both the displacement of multiple empires and the United States itself emerging as a global hegemon. Speaking figuratively now, we know how wars begin. But to paraphrase General David Petraeus’ trenchantly insightful
question not long after the Iraq War commenced, “Tell me,
how does this end?”
This leads us to another reason why I don’t simply call crypto by the name of its present market leader, Bitcoin. I voluntarily put aside the question of which cryptocurrencies will survive, partially as I would like this piece to retain some reasonable shelf life. But also because governments could cut the crypto story dead in its tracks at any time. Note to the bulls: I strongly urge the space to find another name for it. Governments do not like to lose control
of their money without a fight. And they don’t need to look very
far for the casus belli. In a regulatory era determined to ensure that “know your customer” is real, that money can be traced and that it is utilized transparently, the mere expression cryptocurrencies itself invites a crackdown. What Jim Grant calls a “digital bearer bond” should really be called “happy money.” Anything but crypto. In that spirit, there’s also the environmental aspect. As Grant quipped: “That such energy-intensive ‘mining’ makes gold mining look green is, to the Bitcoin faithful, irrelevant.”11 But that cognitive dissonance may not last too long.
Then there is this: I do believe that the Chinese are firmly dedicated to crypto in their bid to undercut one of the most important pillars of American power – the take-it-or-leave-it nature of the dollar standard. Thus, to those who have learned through experience the aphorism “Don’t fight the Fed,” I would suggest that in the not-too-distant future it will be adjoined an important corollary: “Don’t fight the Fed and/or the People’s Bank of China.” While there certainly will be other countries that seek to incorporate crypto into their strategies, I would bet on the Chinese determination to perfect crypto and other aspects of the renminbi alternative as they internationalize their currency. They will scrub their efforts internally and then expand to the Belt and Road and thenceforward to the rest of the world.
As a more significant trading partner to more countries in the world than the United States, the rise of China’s currency to reserve status – at the expense of the dollar – is inevitable. If I had to hazard a guess, it will also involve gold, of which the Middle Kingdom
is the largest producer and the largest buyer. And I believe as
well that it will involve Russia, which made news in 2021 when its gold holdings surpassed U.S. Treasuries for the first time. That is
a meaningful statement, both for how the country views gold (of which Russia has now overtaken Australia for the number two spot in global gold production) and what they seek to accomplish in terms of monetary autonomy. Vested interests are happy interests. Moreover, I believe that, if the Chinese and Russians are not
already acting in concert, they have ensured that their melodies
are harmonious. Then of course there is Mother India, whose love for gold has been requited with higher prices, thereby providing pretty much all Indians with positive reinforcement from holding gold as a store of value. So we have China, India, and Russia with
a genuine vested interest in gold at a time when production is declining and money printing has reached the “ho-hum, just pile it on” phase. In short, I can see that the long-term prognosis for gold – officially as well as unofficially – involves gold. For me personally,
I feel as the lady at the next table to Meg Ryan’s in When Harry Met Sally.... When I watch the reaction of those three ambitious powers reprising her classic euphoria, my only response is, “I want what [they’re] having.”
11 “Bitcoin Goes to Wall Street,” Grant’s Interest Rate Observer, Vol. 39, No. 3, February 19, 2021.
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